Use of retail space expands as neighborhoods grow, but what about office space? If you build (or buy) it, will they come?
They will, but not all at once.
Quantum Commercial Group’s first quarter Office Market Report for 2018 predicts that the overall trend in Colorado Springs over the next several years will be a steady and slow absorption of new and existing office space. In other words, the occupancy rate will grow at a consistent rate.
According to the report, the office building vacancy rate has been holding steady at about 10% for several quarters, which sounds surprising when you consider the growth of the economy.
This flat trend makes sense, however, if you look at a few factors. For one, Colorado Springs currently has an unemployment rate of only 2.5%. This means that there are fewer available workers than even a few years ago, so it is more difficult to find people to put in the empty offices.
Where did those people go? They may be part of a movement towards more efficient use of space. The trend toward “Collaborative” and “Co-working” work spaces, where small businesses use the same space, has become popular. People who might have rented office space can now find workspace with less investment or commitment.
Technology plays a role as well. More companies are allowing people to work from home because so much of their work is done online. In a related trend, many people who live in Colorado Springs commute to Denver to work. That means that the office markets are not necessarily benefiting from the increase of population to the same extent as the residential and retail markets.
They are still benefiting, however. Despite the more efficient use of office space, the vacancy rate is far less than it was in 2010, even with the completion of large projects that stalled during the Great Recession. Commercial real estate remains a profitable investment, even with changes in the way people work. Commercial tenants are often willing to sign longer leases than residential tenants, providing the owner with a stable source of income for many years.
No matter what happens with the market, your property manager can help you make sense of the trends and make the best decisions for your commercial real estate.